Oil prices increased on Monday over fears of potential supply disruption from the Middle Eastern producers as Israel escalated its military actions against Iranian-backed forces in the region.
November delivery contracts for Brent crude saw a steep increase in price climbing 0.71% to $72.49 per barrel, Reuters reported. Brent's December delivery rose 0.7% to $72.04, as trading activity remained robust.
US West Texas Intermediate (WTI) crude futures added 43 cents, or 0.63% to $68.61 per barrel. This comes after WTI and Brent crude fell 5% and 3% respectively last week due to demand concerns despite China's economic stimulus.
Crude prices are rising quickly as a result of Israel's expanding campaign against militant groups such as the Houthi and Hezbollah, which are supported by Iran, an important oil producer and OPEC member.
The ongoing battle could worsen the political atmosphere in Iran, threatening supplies, experts fear.
Fears of disrupted supplies are gripping most countries, and the battle is expected to worsen as Israel escalates its confrontation with Iran's allies by continuing to bomb areas targeted by the Houthis, two days after Sayyed Hassan Nasrallah, the leader of Hezbollah, was killed in an increasingly violent conflict in Lebanon.
Iranian oil exports have increased recently despite the US sanctions that are still in place. Global oil supplies are unlikely to be disrupted by the Israel-Hezbollah conflict unless there is a major escalation that leads to an Israeli attack on Iran's oil infrastructure or Iran closing the Strait of Hormuz, Commerzbank's commodity analyst Carsten Fritsch said in a statement.
Tony Sycamore, Market Analyst, IG, noted that basic supply and demand considerations will impact oil prices. Since the voluntary production cutbacks by OPEC+ are scheduled to expire on December 1, WTI crude will probably test its 2021 lows, possibly dropping as low as $61–$62 per barrel, Sycamore said.
Markets will also closely monitor Federal Reserve Chair Jerome Powell's remarks later today, which are expected to shed light on the pace of the central bank's monetary easing.
